Ireland’s Budget 2016 is to keep the country’s economic recovery going, Finance Minister Michael Noonan has claimed.
Cuts to the deeply unpopular income tax levy known as the Universal Social Charge, more nurses and doctors, more affordable and quality childcare and an end to the unfair tax treatment of the self-employed are among the reforms being announced, the minister said.
“The priority of this Budget is to keep the recovery going while providing relief and better services for the Irish people,” Mr Noonan said.
Mr Noonan told the Dáil that the package of tax cuts and increased spending - worth about €1.5bn - are “sensible, affordable steps that will keep the recovery going and bring its benefits to every family”.
The minister forecast that Ireland’s economy would be the fastest growing in Europe this year at 6.2%, and grow by a further 4.3% next year.
Employment is being forecast to hit close to 1.97m people by the end of this year and the Department of Finance's estimates also predict that 48,000 jobs will be created next year, bringing unemployment down to below 8%.
Mr Noonan said Budget 2016 would bring Ireland’s debt levels to just under 93% of GDP – the Eurozone average.
The only tax rise in the Budget is a 50c hike in the price of a packet of 20 cigarettes – up to around €10.50 for a packet.
“This measure will raise €61.4m in a full year and the additional revenue will enable the funding of new initiatives in the health sector to support young families with children,” said Mr Noonan.
“This is the only tax increase in the Budget.”
“This Government has consigned to the history books the days of boom and bust, and the attitude of ‘if I have it, I'll spend it,’” Mr Noonan said.
On specific tax reforms, the coalition Government confirmed expected changes to the Universal Social Charge (USC).
From next January the threshold for when workers start paying the levy rises from €12,012 to €13,000, taking about 42,500 workers out of the net.
The Government estimated that more than 700,000 workers will not be suffering under the USC next year.
The USC rates change, as expected, from 1.5% to 1% on the first €12,012; from 3.5% to 3% for the next bracket from €12,012 to an increased level of €18,668 and from 7% to 5.5% for higher earners on income in excess of €18,668 up to €70,044.
Mr Noonan said anyone earning less than €70,000 will be paying a marginal rate of tax less than 50% for the first time since the 2009 emergency budget.
The Finance Minister also signalled rising property values in recent years would not mean rising property taxes.
Revaluations of homes for the Local Property Tax (LPT) is to be postponed from 2016 to 2019.
“The postponement of the revaluation date means that homeowners will not be faced with significant increases in their LPT in 2017 as a result of increased property values,” he said.
“Legislation to implement the postponement will be brought forward in due course.”
To ease the tax burden on inheritances Capital Acquisitions Tax will be cut to reflect the recovery in property prices.
The tax-free thresholds allowing parents to leave assets to children will go up from €225,000- €280,000.
Elsewhere, workers putting money into pensions were given a little relief with the pension levy on savings pots being abolished next year.
Other tax credits have been improved, with low paid workers set to see a “significant” improvement in their pay packets.
A levy on the banks which was introduced after they were rescued by taxpayers is to be retained until 2012 and is thought to be worth about €750m.
Mr Noonan returned to capital gains tax, which he said would be reformed to a 20% rate on the disposal of a business worth up to €1m.
“The relief will represent a simplified and upfront benefit for individuals who propose to sell their business,” he said.
Mr Noonan said he was halving fees for the use of debit cards in Ireland to save retailers €36m a year.
The move will come into effect on December 9 and should also save consumers money.
“It is important that this saving is passed on to the consumer in terms of lower prices, and this new fee regime will be monitored closely to ensure this happens,” he said.
In an attempt to encourage more cashless transactions, Mr Noonan is bringing a new 12% charge on ATM transactions from the new year to replace a stamp duty on cards.
“There will be no charge for debit card transactions,” he said.
“No consumer will be lose out as a result of this change as the stamp duty will be capped at the existing levels of €2.50 or €5, depending on card type.”
The tourism and hospitality sector benefits from the retention of the reduced 9% VAT rate.
To encourage consumers to go cash free, the limit for contactless payment cards is being raised from €15 to €30 at the end of the month.
But stamp duty on debit and ATM cards is being removed and replaced with a 12c charge on every ATM transaction, while there will be no charge for debit card transactions.
Hauliers and commercial vehicle users also got some respite with a significant cut to motor tax to bring it closer to the rate in Northern Ireland and the UK.
Five new tax rates for commercial motors will be put in place from January, ranging from €92 to €900, benefiting more than 28,500 companies
Read Michael Noonan’s Budget 2016 statement in full here.